The latest Toys R Us news – the announcement that any time it sells something online or in its new pilot stores, Target and Target.com, not Toys R Us, will be making the sale – made the new reality of Toys R Us hit home.
Toys R Us is never going to be reborn, post-bankruptcy, as a retailer.
The new Toys R Us business model is more social influencer than retailer. Like celebrities and social media stars, it will use its well-known brand to steer consumers to purchases that will be benefit its retail partners, and get a small cut of each sale.
As Toys R Us was collapsing following its 2018 bankruptcy filing, lenders and retail analysts argued the brand was worth more dead than alive, and that the only valuable asset was the beloved Toys R Us name.
Instead of selling the name and Toys R Us trademarks to the highest bidder, the lenders that control the company decided to keep them, and see how much they could make with them.
With the Target deal, their long-term game plan becomes clearer. Let others have the headaches of running stores (b8ta, the retail-as-a-service company that is their partner in the pilot stores) or fulfilling online orders (Target), is what they appear to be saying. We’ll get paid, they figure, if our name brings customers in the door, or to a website that leads to a sale.
While the new model probably means Toys R Us will get just a tiny slice of every sale (Target and Toys R Us did not reveal the financial arrangements behind their deal), the amount it has to spend upfront for this new way of doing business is also tiny, compared to real retail. They don’t need to hold inventory, have fulfillment centers, or most of the costs of traditional retail.
On the Toys R Us website, relaunched Tuesday, visitors can read toy reviews, and “best of” lists, as well as the top picks of Geoffrey, the cartoon giraffe mascot of the Toys R Us brand. Recommended toys have “buy now at Target.com” links.
Target also will fulfill any online purchases made at the two pilot stores scheduled to open next month. The b8ta model, as displayed in its existing stores, is showrooms that introduce consumers to brands, often with the ultimate goal being an online, rather than in-store, purchase.
The Target deal answers the question of which competitor has benefited most from the collapse of Toys R Us. “To me, this solidifies what I’ve been saying all along – Target won the toy war,” was how James Zahn, senior editor of The Toy Insider and The Toy Book reacted to the news.
Of all the companies that tried to capture the sales up for grabs after the demise of Toys R Us, Target “was the only major retailer to make a real investment, not just in expanded product assortment, but in a complete reimagining of their toy departments,” Zahn said.
The Toys R Us website, despite not offering anything for sale since mid-2018 until it was relaunched Tuesday, still draws a large amount of traffic, Zahn said. But it remains to be seen how much click-through traffic it will drive to Target.
The only way Toys R Us could get back in the game was with a partner like Target that that would be the actual retailer.
Toys R Us’ new strategy is to be a retailer in name only, and lend its name to businesses that actually make and sell the products. With its stores, which it promises will be places where kids and parents can play with toys, and have fun experiences, it hopes to keep the Toys R Us brand popular, so it remains a valuable partner for companies that want to sell toys. But Toys R Us won’t actually be selling them.
Richard Barry, chief executive of TRU Kids Brands, the parent company of Toys R Us, in announcing the Target deal said “our U.S. strategy is to bring back the Toys R Us brand in a modern way through a strong experiential and content-rich omnichannel concept.”
TRU Kids’ strategy definitely is modern. It plans to draw customers on the strength of its brand and outsource the sales operations to others.
Now let’s see if Toys R Us mascot Geoffrey does as good a job selling his top toy picks and Kylie Jenner does selling lipsticks.